Thoracic Vascular Stent Grafts Market Investment Activity From Established Companies Are to Create Attractive

Semin Intervent Radiol. 2009 Mar; 26(1): 56–66.

Aortic Stent Grafts

Guest Editor S. William Stavropoulos M.D.

Endovascular Repair of Aortic Affliction: A Venture Capital Perspective

Lucas W. Buchanan

^aneHealth Intendance Management Section, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania

Due south. William Stavropoulos

²Section of Radiology, Sectionalisation of Interventional Radiology, Hospital of the University of Pennsylvania, Philadelphia, Pennsylvania

Joshua B. Resnick

ⁱⁱⁱSection of Emergency Medicine, Brigham and Women'south Hospital, Harvard Medical Schoolhouse, Boston, Massachusetts

Jeffrey Solomon

²Department of Radiology, Division of Interventional Radiology, Hospital of the Academy of Pennsylvania, Philadelphia, Pennsylvania

ABSTRACT

Endovascular devices for the treatment of abdominal and thoracic aortic illness are poised to get the side by side $1 billion medical device market. A shift from open repair to endovascular repair, advances in applied science, screening initiatives, and new indications are driving this growth. Although billion-dollar medical device markets are rare, this field is fraught with risk and dubiety for startups and their venture capital letter investors. Technological hurdles, daunting clinical and regulatory timelines, market adoption issues, and entrenched competitors pose significant barriers to successful new venture cosmos. In fact, the number of aortic endografts that take failed to accomplish commercialization or have been pulled from the market exceeds the number of Nutrient and Drug Administration–approved endografts in the United states of america. This commodity will shed some light on the venture capital listen-set and decision-making epitome in the context of aortic affliction.

Keywords: Venture capital, endovascular therapy, endografts, aortic disease, aneurysms

VENTURE Uppercase

Innovation in health care often occurs in small, early stage companies that rely heavily on venture upper-case letter financing and support. Venture upper-case letter is the link between new ideas and the capital to plow those ideas into marketable products or services, and venture capitalists are intimately involved in the formation and governance of startup companies. Due to the high risk, the incertitude of outcomes, and the long-term nature of life sciences commercialization, venture investment is often the only funding selection for these minor companies.¹ In the medical device industry in 2006, a remarkable 83% of employment is estimated to have stemmed from venture-backed firms.ⁱⁱ

Venture capitalists put money into early on phase companies in exchange for buying, or "equity," in the company. Follow-on investments provide additional capital as the company grows and reaches certain milestones (eastward.1000., design freeze, successful animal trials, successful human being trials, Food and Drug Administration [FDA] blessing, etc.). These "rounds" of financing, frequently denoted Seed, Series A, Series B, Series C, and then on, typically occur every year or ii. Because there is no open market that sets the price of this equity, the valuation at which the venture capital letter house purchases shares in each round is a thing of negotiation between the venture backer, the company direction, and other investors or stockholders. Post-obit an initial investment, information technology typically takes three to 8 years earlier the firm tin "exit" the investment through an acquisition of the company or an initial public offering (IPO). In the interim, the shares in the company have paper value only considering in that location is no market place to sell those shares—the investment is "illiquid." There is trivial realized value until the company is acquired or goes public. Profitability is oft even further abroad. Venture upper-case letter is an extremely high-risk, long-term investment vehicle.

Structure of Venture Majuscule

Venture capitalists are essentially managers of risk capital. They spend their time raising coin, sourcing investment opportunities, performing due diligence on potential investees, pricing and structuring investments, monitoring and adding value to portfolio companies, and seeking ways to get out their mature investments. The venture capital firm is the general partner (GP) of a venture upper-case letter fund, and the institutional investors in the fund (or funds) are called the limited partners (LPs). Venture uppercase funds are typically organized equally fixed life partnerships, usually having a life of x years.

A typical fiscal arrangement between the GP and the LPs is what is termed the "two and twenty" rule, meaning the GP earns an annual management fee of 2% of the committed capital during the period of investments (often less in later years) and 20% of the profits of the fund, also called the "carry." The behave is the GP's fee for carrying the direction responsibility and all the liability of the fund. For example, if a fund was raised with $100 million of committed capital, and subsequently 8 years, $80 million of investments ($100 million less accumulated management fees) made in the fund returned $200 one thousand thousand via IPOs and acquisitions, the fund would pay back the original $100 million investment in the fund to the LPs, distribute an additional 80% of the profits ($fourscore million) to the LPs, and distribute twenty%, or $twenty million, of the "carried interest" to the GPs. There are many different flavors of this organisation, but this is the bones structure. Meanwhile, the GP has nerveless 2% of $100 million, or $two million annually, to manage the fund (pay salaries, function hire, expenses, etc.) (Fig. 1).

An external file that holds a picture, illustration, etc. Object name is sir26056-1.jpg

Structure of venture capital letter.

Venture Upper-case letter and Medical Devices

The venture capital business is by nature loftier risk, thus the institutional investors (LPs) in venture upper-case letter funds look significant returns for the risk they are taking on when they invest in venture upper-case letter funds. The average annual 10- and 20-year returns (after management fees and carried interest) for venture uppercase funds as of June xxx, 2008 were 16.6% and xvi.9%, respectively, as compared with ane.2% and 8.0%, respectively, for the S&P500.ⁱⁱⁱ Yet the number of venture-backed firms that eventually fail is estimated at over 53%.² And not all IPOs or acquisitions necessarily generate high returns. To achieve 15 to 20% returns in the face of company failures and mediocre exits, a subset of investments must take returns much greater than the average. This is the home run philosophy of investing, that is, ane home run makes up for lots of strikeouts.

Although medical device-specific venture capital letter returns are difficult to estimate, the amount of capital invested into medical devices companies was xiv%, or $four.3 billion, of the $29.nine billion of venture capital invested in total in 2007, and represented 45% of the dollars allocated inside the wellness care sector.^iv Medical device venture capitalists need to invest in those innovative technologies that can exist applied to market place opportunities with significant revenue potential to achieve returns well above the costs of evolution. The estimated cost to successfully develop and commercialize a medical device (often requiring a premarket approving [PMA] clinical trial) is approximately $twoscore to $100 million.⁵ Three of the leading venture-backed aortic endograft companies, TriVascular2, Inc. (Santa Rosa, CA), Aptus Endosystems, Inc. (Sunnyvale, CA), and Nellix Endovascular Inc. (Palo Alto, CA) have each raised $65, $59, and $xx million to date, respectively.⁶ Considering the pregnant cost of development, well-known medical device venture firms often list investment criteria on their websites that include addressable market opportunities of $500 million to $1 billion or greater.^vii

AORTIC Disease

Venture Capital and Endovascular Repair of Aortic Illness

Venture capitalists have been involved in the funding of innovative endograft companies since the late 1980s, helping to start early pioneers like Prograft Medical, Inc., AneuRx, Inc., and EndoVascular Technologies Inc., the original manufacturers of the Excluder, AneuRx, and Ancure endografts, respectively. After nigh 20 years of market development and clinical trials, endografts are condign the standard of care for sure aortic disease presentations and have get the most recent medical device product category to knock on the door of the billion-dollar guild. At that place are still unmet clinical needs, and venture capitalists continue to fund innovative endograft companies (Table one).

Table 1

Historical and Contempo Venture-Backed Aortic Endograft Companies

Company	Founded	Technology	VC Investors	Venture Investment (Millions of Dollars)	Exit	Condition
Sources: printing releases, SEC filings, CapitalIQ database, VentureXpert database.
IPO, initial public offering; FDA, Food and Drug Administration.
EndoVascular Technologies, Inc.	1989	AnCure unibody endograft	J.P. Morgan Partners, Kleiner Perkins Caulfield & Byers, Mayfield Fund, Menio Ventures, Piper Jaffray Ventures, Sequoia Upper-case letter, Suez Ventures, Trinity Ventures, The Vertical Group	$34.viii	IPO Feb 1996 with market value of $82.8 meg; acquired by Guidant in December 1997 for $171 one thousand thousand	AnCure no longer available
Prograft Medical, Inc.	1993	Excluder modular endograft	Institutional Venture Partners, St. Paul Venture Capital, Kingsbury Associates	northward/a	Caused past W.Fifty. Gore & Associates in June 1997	FDA approved
AneuRx, Inc.	1993	AneuRx modular endograft	MedVenture Associates, Delphi Ventures, Mohr Davodow Ventures, Morgenthaler Ventures, New Enterprise Associates, Brentwood Venture Capital, Three Arch Partners, ONSET Enterprise Associates, Windspeed Ventures	$15.2	Acquired by Medtronic, Inc. in May 1996 for $68.6 million	FDA approved
TriVascular, Inc.	1998	Enova endograft with injectable polymer channels	ABS Ventures, Delphi Ventures, The Vertical Grouping, De Novo Ventures	$19.five	Caused past Boston Scientific in April 2005 for $65 million in addition to its previous investments and notes issued of approximately $45 meg	Failed in clinical trials
Nellix Endovascular, Inc.	2001	Sac-anchoring prosthesis	Essex Woodlands Wellness Ventures, Ring of Angels, Incubic Venture Fund	$xix.6	n/a	In development
Aptus Endosystems, Inc.	2002	Endograft with endostapler	U.South. Venture Partners, Prism VentureWorks, Baird Venture Partners, FirstMark Capital, Heron Uppercase	$59.2	n/a	U.s.a. IDE stage 2 trial completed February 2009
TriVascular2, Inc.	2007	Endograft with injectable polymer channels	Delphi Ventures, New Enterprise Associates, MPM Majuscule, Kearny Venture Partners	$65.0	n/a	In evolution (redesign)

The Aortic Endograft Marketplace

Unlike the pharmaceutical and biotech markets, where multibillion-dollar production categories are mutual (lipid regulators $eighteen.4 billion in 2007, proton pump inhibitors $14.one billion in 2007), billion-dollar-plus medical device categories are still somewhat rare.⁸ Likewise cardiology blockbusters like coronary stents ($v.2 billion in 2007) and implantable cardiodefibrillators ($5.7 billion in 2007) and orthopedic categories like hips and knees ($five.0 and $5.viii billion in 2007, respectively), most medical device product categories are niche $50 to $500 million market opportunities.⁹

The total endograft market size is difficult to estimate considering two of the acme three endograft manufacturers, Cook Medical (Bloomington, IN) and W.L. Gore & Associates (Flagstaff, AZ), are private companies whose sales data are not publicly available. Medtronic, Inc. (Minneapolis, IN), a public company and the other leader in the marketplace, achieved global endograft (abdominal and thoracic) sales of $285 million in their fiscal twelvemonth ended Apr 30, 2008, and Wall Street analysts await them to achieve growth of 16% to reach sales of approximately $330 meg for the year concluded Apr 30, 2009.¹⁰ ^, ^xi iData Research and Millenium Research Group, two well-known market research firms in the medical device space, each estimates that the U.Southward. aortic endograft market place (abdominal only) will reach or exceed $500 1000000 by 2010.¹² ^, ^xiii When combined with thoracic and international markets, the full opportunity may well already exceed $ane billion (Fig. two).

An external file that holds a picture, illustration, etc. Object name is sir26056-2.jpg

U.South. endograft market size estimates. (Source: Millenium Research Grouping, iData Research.)

Venture capitalists accept been agile in the last decade in seeding and developing a new generation of endograft engineering science companies that aim to improve upon the shortcomings of existing marketed devices and expand endovascular therapy to new frontiers. Assessing the endograft market and placing strategic bets requires a venture capitalist to use a similar framework every bit to how a physician would appraise a given patient who may be eligible for a new or emerging therapy.

Physician: INDICATIONS AND PATIENT Choice; VENTURE CAPITALISTS: INDICATIONS AND SEGMENT Option

Height venture capitalists may receive 1000 to 2000 new ideas and companies a year, evaluate as many as 200 to 300 of them, and fund simply 8 to x.^five Thus venture capitalists demand to screen opportunities quickly to qualify opportunities that deserve a closer look and dedication of time and resources.

Presume that a given set of investment opportunities each has a solid intellectual property foundation and reputable direction team (ii of the nigh important criteria for venture capitalists, which nosotros will take for granted herein). Choosing which visitor or technology to invest in from this opportunity set outset requires an analysis of the existing or potential market segments and the limitations of electric current technologies or standards of care. Venture capitalists often ask 3 bones initial questions: (one) Is the target market segment big enough? (two) Is at that place a articulate clinical need or patient benefit addressed past the applied science? (3) Does the technology provide fourth dimension savings, ease-of-use benefits, and/or financial advantage for the doc?

The Intestinal Aortic Aneurysm Market

The largest market opportunity for endovascular engineering is infrarenal intestinal aortic aneurysms (AAAs), currently near a $400 million market in the United states of america alone.¹² ^, ^xiii Early growth in the AAA market was constrained due to durability issues with offset-generation grafts, including migrations, device kinking, stenosis/thrombosis, and suture or stent breakage.^xiv ^, ¹⁵ As engineering and patient selection improved, and as compelling clinical bear witness from randomized trials similar the DREAM and EVAR I trials take shown the safety and benefits of endovascular repair, the AAA endograft market has continued to abound.^xvi ^, ¹⁷ In the United States, the number of endovascular repairs of AAAs is now estimated to exceed the number of open up surgical repairs of AAAs (Fig. 3).

An external file that holds a picture, illustration, etc. Object name is sir26056-3.jpg

U.S. endovascular repair procedures and penetration estimates. EVAR, endovascular aneurysm repair. (Source: Millenium Enquiry Group, iData Research.)

Yet the open versus endovascular argue is still a major topic at interventional and surgery meetings and a demand nevertheless persists for endograft technologies that are complimentary from migration, endoleak, and long-term durability concerns. Lower-profile, easier-to-use delivery systems are also solutions many physicians would welcome, which could markedly aggrandize the addressable market. Looking forrad, the AAA segment could abound even faster if clinical studies on early intervention for small aneurysms (4 to 5.5 cm in diameter) prove conclusive, and if screening initiatives like the recently passed SAAVE act (onetime "Welcome to Medicare" screening) reveal a big prevalence of aortic affliction currently asymptomatic or undiagnosed. Incremental technological advancement and better patient choice accept resolved many of the starting time-generation issues, only there is still ample opportunity to improve endograft engineering science in more circuitous cases where iliac access is a business concern or where infrarenal necks are brusque or highly angulated.^xviii Given the technical shortcomings of existing technologies equally well every bit the large market currently underserved by FDA-approved endografts, the AAA endograft marketplace is compelling for venture capital investment.

The Thoracic Aortic Affliction Market

The next logical market opportunity for innovative endovascular technology is thoracic aortic disease. Open surgery for thoracic aortic illness is highly invasive and morbid, and a strong clinical benefit exists for endovascular approaches.¹⁹ With market size estimates from $100 to $200 one thousand thousand (Fig. two), it falls beneath the typical $500 million threshold for venture uppercase attention, but the thoracic segment is still attractive if a company tin can leverage technology platforms developed for abdominal aortic disease.

Within the thoracic aortic affliction segment, the subsegment adding is challenging, considering the range of diseases and indications is more variable than intestinal aortic affliction. The location of illness (descending, arch, ascending) and blazon of disease (aneurysm, pseudoaneurysm, penetrating ulcers, type B dissection, type A dissection, coarctation, trauma) bear on whether a given engineering science platform will or will non exist appropriate with minimal redesign. Vessel diameters, blood flow dynamics, visceral vessels, and arch curvature all present applied science challenges much different from the intestinal aorta. Therefore, the venture backer has to look at each subsegment separately and challenge companies that merits their AAA engineering science platform can provide solutions for thoracic aortic illness.

Niche Markets for Complex Aortic Affliction

Within both the aortic and thoracic marketplace segments, new endovascular applied science is needed for the treatment of highly complex disease, including juxtarenal and pararenal aneuryms, concomitant iliac illness, and arch-located disease. Fenestrated and branched endografts, endostapling systems, and low-profile or percutaneous commitment systems all attempt to bring endovascular engineering to complex cases typically reserved for surgery or otherwise left untreated.²⁰ ^, ²¹

From a venture majuscule perspective, these borderland market segments have a compelling clinical demand, but the incidence of cases might be too small to justify starting a new company dedicated to providing a solution. Additionally, in the case of branch and fenestrated endografts, custom devices are frequently required, which are expensive to produce and may crave the resources of a big visitor. The incumbent marketplace participants can justify research and evolution (R&D) investments in these niche segments as they tin can leverage existing technology platforms and engineering resource. The innovation leadership and symposia attending help to strengthen their brands and solidify their core endograft businesses. Indeed, while Medtronic, Melt, and Gore all take funded branch and fenestrated graft development programs, there are currently no startups directly pursuing this engineering science as their core focus.

The Endoleak Market

Another aortic disease market segment a venture backer could consider is the treatment of postoperative complications, most notably endoleaks. The incidence of blazon I, III, and 4 endoleaks is relatively low, which limits the overall opportunity. Treatment for type I and III endoleaks are also typically resolved with an boosted endograft component readily available from manufacturers, or surgery in some cases.²² The incidence of type II endoleaks is larger, estimated at 25%, merely the actual clinical significance of these endoleaks remains debatable.²² Coils and glues used to treat type II endoleaks tin sell for $1000 to $1500, significantly lower than the $x,000 to $12,000 price tags for endografts. A back of the envelope calculation might go something like this: endoleak maximum market potential = (40,000 endovascular AAA procedures) * (twenty% incidence of blazon II endoleaks) * ($1000 to $1500 device toll) = $eight to $12 million maximum U.S. marketplace potential. This is simply not a big enough marketplace for a venture business firm who needs to invest in large market place opportunities with the expectation of abode run returns to satisfy the LP investors in the fund. For physician innovators or small companies with novel endoleak solutions, the culling to seeking venture upper-case letter investment might be to license or codevelop with a large company already in the infinite. The better quest for a venture capitalist is to observe an endograft applied science that prevents endoleaks in the starting time place, rather than focusing on how to set them postoperatively.

Doctor: IMAGING AND PREOPERATIVE PLANNING; VENTURE Backer: DUE DILIGENCE AND PREINVESTMENT PLANNING

Once the venture capitalist has appropriately sized and segmented the market opportunity and defined the clinical needs and limitations of existing engineering science, he or she can turn his or her attention to emerging technologies and specific investment opportunities. Ane primary aim of due diligence is to assess the market adoption potential of a given applied science or product. Besides spending a considerable amount of time doing technical and engineering due diligence and evaluating bench, preclinical, and clinical data reports, venture capitalists talk at length to key stance leaders and high-volume practitioners about the adoption potential of specific technologies and the limitations of current standards of intendance. Looking at the current landscape of venture-backed endograft companies, one can speculate as to the key questions that arose for each technology that afflicted the investment decision for the venture firms that may have performed due diligence (whether or not they invested).

Endostapling Technology

What is the true market opportunity for endostapling technology? If used only for redo procedures in case of migrating or migrated endografts, the market place opportunity would only be the estimated (0.v to 5%) of cases annually that require this secondary intervention and clearly non what the companies and their venture backers set out to achieve.²³ The real opportunity is coupling endostapling engineering with a complementary endograft every bit the primary method of aorto-graft fixation, as in the case of the Aptus™ Endovascular AAA Repair Organisation. For endostapling technologies, the due diligence questions might include: is this a niche technology that will just exist used in cases where the doc thinks fixation will be a trouble (east.1000., brusk necks or angulated necks)? If then, how reliably does the endostapler perform in severely angulated cases or in cases where aortic buy may be an issue due to the presence of calcium or thrombus? Or will the technology become a preferential device to be used for straightforward cases as well as more than circuitous cases? How much additional time, if any, does the use of an endostapler add together to the process? Is there a chance of misfiring the staple and having it embolize? What about the long-term durability of the staples? Will they stay in place through mechanical and bioincorporation forces? Is the endostapler intuitive and easy to employ? Is the endograft itself immune from first-generation endograft problems similar kinking, graft material degradation, or component decoupling?

Percutaneous Endografts

TriVascular (now TriVascular2) and Nellix Endovascular are two examples of venture-backed companies offer entirely new approaches to endograft design than the traditional textile-covered metallic stent construction. TriVascular2 has developed an innovative unibody pattern with an injectable polymer that fills sealing rings at multiple levels during deployment and later hardens to provide support to the body of the endograft (in identify of stent structures). See http://www.trivascular2.com for more information. Nellix Endovascular is developing a "sac-anchoring prosthesis" engineering that creates a channel for claret period while filling in the sac with a bag filled with an injectable substance. Run across http://www.nellix.com for more information.

Both innovative designs allow the technologies to be delivered at a very low contour (12- to 16-French), which would permit delivery through calcified and narrow iliac arteries where other larger-contour delivery systems frequently cannot laissez passer and perhaps conductor in the era of truly percutaneous endograft repair.

For these technologies, there are numerous due diligence questions related to the technical and blueprint aspects, but the same adoption questions employ: Will they exist piece of cake to utilize and evangelize? What safety or efficacy issues may emerge through the apply of the injectable materials? Will they become niche devices just used for sure circuitous cases, or will they become preferred endografts for all endovascular cases? Will these devices expand the addressable market for endovascular repair and increment penetration into cases typically selected for surgical repair? If approved, will physicians adopt the devices readily, or will they wait for clinical data that prove long-term durability?

PHYSICIAN: CONTRAINDICATIONS TO THERAPY; VENTURE CAPITALIST: CONTRAINDICATIONS TO INVESTMENT

The market place opportunity has been vetted, and a venture capitalist feels confident near the value proposition and adoption potential of a specific visitor's technology or product. At present the focus turns to the path to commercialization and the future competitive landscape.

Clinical and Regulatory Path

There are 2 primary regulatory paths for medical devices: 510(k) and PMA. A 510(k) is typically the easier, less plush path and requires that the visitor show that their device is "substantially equivalent" to a previously 510(chiliad)-approved product on the marketplace. A clinical trial is sometimes required, but usually not. A 510(one thousand) can typically gain approval inside 3 months of filing. The advantage of a 510(chiliad) is speed and lower price, but the disadvantage is that there are fewer barriers to entry for competitor devices. Information technology is worth noting that at the time of publication, in that location is a tremendous amount of turmoil in the medical device regulatory world around the ceremoniousness of the 510(k) pathway, especially for implantable or nontrivial risk devices. The public policy argue is active, and in the coming years the FDA may crave clinical trials to prove safety and efficacy for all just the nigh piffling of devices. This will increase the costs and fourth dimension required to accomplish commercialization and factor into the venture uppercase equation.

The PMA regulatory route is more complex and requires a clinical trial with specific safety and efficacy thresholds and tin can take upward of ii years or longer to receive approval. The disadvantage of a PMA is the length of time and significant expense required, but the advantage is that once approved, there are loftier barriers to entry for others seeking to get into the market (they also take to go the PMA route). To appointment, all endografts in the United States have fallen under the PMA route. In the endograft space, a venture backer must gauge the investment and time required to run a PMA clinical trial and receive approving. Historically speaking, endograft PMA trials have been notoriously long, and information technology has become increasingly difficult to consent and enroll patients when commercially available endograft alternatives exist (Table 2).

Table 2

Time from Pivotal Trial to FDA Approval

Company/Product	1st Patient, Pivotal U.Due south. Trial	FDA Canonical	Fourth dimension Lapse (y)
Source: visitor websites, clinicaltrials.gov, press releases.
FDA, Food and Drug Administration.
Medtronic AneuRx	Apr 1997	September 1999	2.v
Gore Excluder	December 1998	November 2002	iii.9
Gore TAG Thoracic	September 1999	March 2005	iv.half-dozen
Cook Zenith	January 2000	May 2003	3.4
Endologix Powerlink	July 2000	October 2004	iv.3
Medtronic Talent	February 2002	April 2008	6.3
Medtronic Talent Thoracic	December 2003	June 2008	4.6
Cook TX2 Thoracic	April 2004	May 2008	four.2

Reimbursement

FDA approving is merely the first stride on the path to commercial and investment success. Increasingly, acquirers and public marketplace investors want to see established reimbursement for novel medical devices, and thus venture capitalists desire to clearly understand the reimbursement strategy during their due diligence. For almost novel medical devices, the reimbursement pathway tin can exist long, arduous, and highly fragmented. As opposed to the FDA, which provides central regulatory approval, there is no central pathway to reimbursement approving. Before the Center for Medicare and Medicaid Services (CMS) or most commercial insurers will even consider reimbursing a new procedure, they normally require American Medical Association and subspecialty buy-in, multiple peer-reviewed journal articles, idea leader presentations and testimonials, and economical cost-benefit analyses. In one case these assets are in place, each of the 11 CMS regional bodies and each private insurer must be independently lobbied for reimbursement rates. In the case of new aortic endografts, this is less of an issue as new technologies will be able to draft off of existing reimbursement paradigms for endovascular aneurysm repair. To the extent that novel technologies fall outside of established reimbursement codes, the venture capitalist will factor this into their investment decision.

Competitor Forcefulness and Product Pipelines

FDA approval and reimbursement are not necessarily the panacea: the venture capitalist must besides appraise the likelihood of market place adoption in the face of potent competition from incumbents, many of whom take sponsored training for surgeons and interventionalists and retain some measure of company or product loyalty. The aortic endograft market is dominated by three large incumbents (Medtronic, Cook, and Gore) and a fourth emerging player (Endologix, Irvine, CA). Sales reps from these companies are highly trained and a valuable resource in the pre–case planning and intraoperative environs. Venture-backed companies take significant incumbent relationships to overcome in getting their new devices trialed, or they must spend meaning sums of coin to railroad train and hire experienced sales reps.

Compounding the trouble of strong incumbent relationships is the fact that these companies are besides spending heavily on R&D to develop new products. An assay of press releases and other publicly available data reveals a potent new product pipeline for these companies (Table iii).

Table 3

Endograft Pipelines

Company	Product	Status
Sources: press releases, clinicaltrials.gov, company websites.
OUS, outside the United States.
Abdominal
Lombard Medical (Oxfordshire, U.k.)	AorFix	U.South. trial initiated October 2006; approved OUS
Aptus Endosystems	Aptus AAA Repair System	U.South. trial initiated September 2007
Medtronic	Endurant	U.Due south. trial initiated June 2008; approved OUS
Cook	Zenith LP	U.S. trial initiated Oct 2008
Thoracic
Medtronic	Valiant	U.S. trial initiated December 2006
Bolton (Sunrise, FL)	Relay	U.Southward. trial initiated January 2007
Cook	Zenith	In EU clinical trials
	Dissection

A venture capitalist must assess this pipeline vis-à-vis their investment opportunity. Does the startup company have an incremental or leapfrog technology? For instance, do they have an incrementally better profile reward (16- to 18-French) or a leapfrog advantage (12-French or less)? In either case, for how long might they take marketplace exclusivity before the incumbents' product development efforts take hold of up? Would the incumbents exist better off ownership the startup or developing on their own? Considering the evolution and regulatory timelines are and then long in the endograft space, trying to anticipate what the competitive landscape will look similar upon approval is difficult. What appears to be an advantage today may non be then in a few years fourth dimension. For example, endostapling technology is a compelling solution to the migration trouble, which perhaps was one of the clinical need targets that startup companies were founded to address. But many physicians now fence that the migration trouble is no longer a big issue at present that technique and patient selection has improved. On the other mitt, endostapling may allow for condom and effective endovascular repair in patients with aneurysm anatomies that would currently require open up repair due to limitations of commercially available endografts.

Doctor: OUTCOMES; VENTURE CAPITALIST: EXITS

Venture capitalists often expect at historical exits and valuations before making their first investment in a company. Indeed, inquiry has shown that market entry (new companies) is positively associated with prior merger and acquisition (Chiliad&A) action in the sector, the number and valuation of prior IPOs for firms in that sector, and the amount of venture capital funding invested in firms in that sector.²⁴ Despite a historically active M&A market, successful exits of venture-backed companies dedicated to the endovascular repair of aortic disease are artifacts of history and produced few "habitation runs." In that location has only been one IPO of a venture-backed endograft company, over 10 years ago, and in that location has never been a venture-backed go out of a private visitor with a valuation in excess of $100 meg (recollect that the cost to develop and commercialize a medical device is estimated at $xl to $100 million). Other companies that were financed through corporate investments or other nonventure forms of financing also had exits typically in the sub-$100 million range (Table 4).

Table 4

M&A and IPO Activity of Aortic Endograft Companies

Date	Company	Product	Go out	Value (Millions of Dollars)
Sources: SEC filings, press releases, CapitalIQ.
K&A, merger and acquisition; IPO, initial public offering; EVT, Endovascular Technologies, Inc.; AVE, Arterial Vascular Engineering science.
February 1996	EVT	Ancure	IPO	$82.8
April 1996	AneuRx	AneuRx	Acquired by Medtronic	$68.half dozen
May 1996	MinTec	Vanguard	Acquired by Boston Scientific	$72.0
June 1997	Prograft Medical	Excluder	Caused by W.L. Gore	n/a
October 1997	EVT	Ancure	Caused by Guidant	$171.0
April 1998	World Medical Mfg Corp	Talent	Caused by AVE	$62.0
December 2001	TERAMed	Ariba/Breakthrough	Acquired by J&J Cordis	due north/a
May 2002	Endologix	Powerlink	Merged with Radiance Medical	$33.0
Feb 2005	Endomed	EndoFit	Acquired by LeMaitre Vascular	$four.1
Apr 2005	TriVascular	Enova	Acquired by Boston Scientific	$65.0

Compounding the historical trouble is the current relative lack of acquirers for endograft technologies. Cook and Gore both have a reputation for developing new technology in-house or in collaboration with physicians rather than acquiring startup companies. Medtronic acquired AneuRx in 1996 and inherited the Talent endograft from its acquisition of Arterial Vascular Engineering in 1999, but it has full-bodied on in-house evolution ever since and has non fabricated any minority equity investments in startup endograft companies as it tends to do in other markets. All three of these market place leaders are less attractive exits to venture investors anyhow, as valuation is a function of cannibalization for incumbent market participants—they are less likely to brand their ain technology obsolete.²⁴ It is hard to justify a high acquisition price premium when buying a technology that will cannibalize some amount of an existing sales base of operations. For a nonincumbent, the valuation premium could be much college because they would get the total benefit of the new acquirement stream. Venture capitalists must assess all of these exit scenarios and likely valuations fifty-fifty though the go out itself may be years away.

PHYSICIAN: COMPLICATIONS; VENTURE CAPITALIST: COMPLICATIONS

EndoVascular Technologies, Inc., which was caused by Guidant Corporation in 1997, experienced a series of malfunctions with the delivery system of their AnCure device after FDA approval in 1999. Later on failing to study these malfunctions while promoting an untested technique to resolve the malfunctions, Guidant close down the sectionalisation and eventually entered into a plea agreement with the U.S. Section of Justice in 2003 and made a payment of $43.iv million with an additional $49 million civil settlement. The gross misconduct of the corporation resulted in one of the first guilty pleas to criminal felony convictions.²⁵ Although the original venture capital investors had exited the visitor via IPO earlier these problems arose, you can be sure the bar was raised much college for all futurity investment opportunities in which presumably small technical bug could literally cause the failure of a visitor.

The original TriVascular spent nine years and over $20 meg of venture uppercase coin and an additional undisclosed amount of funding from Boston Scientific (Natick, MA) before encountering issues with their Enovus endograft. After the company was acquired by Boston Scientific in 2005, the phase II clinical trial was halted in 2006 after experiencing at to the lowest degree 2 dozen stent fractures, and in 2007 the FDA warned Boston Scientific and its TriVascular subsidiary almost inadequate record-keeping and reporting following v patient deaths in the trial.²⁶ Again, the venture capitalist investors escaped pregnant financial harm through the leave to Boston Scientific in 2005, but they obviously highlighted the failure of due diligence to uncover or anticipate the stent fracture result and they likewise failed to compensate the $31 one thousand thousand earn-out portion of the acquisition bargain (an earn-out is a portion of the acquisition proceeds that are paid contingently upon achievement of sure milestones, for example, regulatory approval or sales benchmarks).²⁷

Many other endograft technologies have failed post-acquisition as well, including Boston Scientific's $72 million conquering of Mintech Inc. and the Vanguard device in 1996, which was widely used in Europe just never introduced in the United States due to poor results in a controlled clinical trial.²⁸ Johnson & Johnson's Cordis sectionalisation (Warren, NJ) caused TERAMed in 2001 but the Fortron/Quantum endograft never achieved FDA approval and was pulled from international markets. Arterial Vascular Engineering caused Earth Medical Manufacturing Corp.'s Talent endograft in 1998, and was afterwards caused by Medtronic in 1999. Although the Talent endograft has been successfully marketed internationally since 1998 and in fact has been an international market place leader for much of the past decade, it has merely been bachelor in the The states since 2008 due to an extremely long approval procedure stemming from undisclosed issues. Many physicians had expected this device to exist canonical in the United states as early equally 2003, and so presumably did Medtronic and Arterial Vascular Engineering in their conquering valuation models. Edward'southward Lifesciences (Irvine, CA), which had previously caused technology from Endogad Enquiry Pty. Limited, tried to sell their Lifepath endograft in 2003, and after failing to observe a buyer, it was discontinued in 2004.²⁹ Terumo Corporation of Japan acquired Sulzer Vaskutek Ltd. in 2002 and inherited the Anaconda endograft, which is available internationally simply has nonetheless to brainstorm a U.S. pivotal trial. All cases of heir-apparent beware and examples of how notoriously difficult it is to successfully commercialize endograft technologies.

All of these endograft failures have forced today's potential acquirers to be much more rigorous in their ain due diligence earlier making acquisitions in the endograft space. Having learned from previous failures, potential acquirers are forcing startups and their venture investors to spend more fourth dimension and more than coin proving the viability of their technologies before entertaining an conquering. This puts more pressure level on venture capitalists to reserve plenty "dry out powder" for follow-on investments, which highlights the opportunity cost of non investing in other promising opportunities with those same funds. They too must suffer longer belongings periods before exiting their investments, which means it takes longer to show returns to their own demanding LP investors.

Decision

Venture capitalists are in the business of taking large risks in the expectation of large rewards. On the advantage side, the endovascular repair of aortic disease represents an opportunity with meaning potential: an existing market in excess of $1 billion, compelling growth for the foreseeable hereafter, and the demand for more advanced technology solutions to overcome the limitations of existing devices and expand handling to circuitous abdominal and thoracic aortic disease segments. Many venture capitalists are also intrigued by the potential of percutaneous endografts in terms of client base of operations. Sub-12-French devices negating the need for a surgical cutdown could exist marketed and sold to a wider client base of operations.

On the risk side, this market has many: a long PMA regulatory path with expensive clinical trials, strong incumbent competitors with solid new production pipelines, and a history of failed devices and relatively small exits. These risks may deter many venture capitalists, but that does not necessarily hateful innovation will slow or cease in the aortic disease market. Venture majuscule is only one innovation pathway for opportunities that see certain criteria. Alternative forms of financing may be available with different criteria, including government programs and high-net-worth individuals. Physician innovators and engineers can license or sell their intellectual property and work straight with established companies rather than try to start new companies and perhaps get to market place even sooner by leveraging established expertise, resources, and infrastructure. The market leaders will go along to invest in research and development informed by physician customers and consultants. All are viable pathways to innovation.

And but as innovation is non solely reliant on venture uppercase, the hereafter of aortic affliction is not solely reliant on endografts. Advances in imaging engineering and postoperative monitoring may negate the need for costly and repetitive computed tomography scanning. Advances in robotic surgery and hybrid endovascular and open surgery techniques will open up new frontiers for surgeons. Research done by Frederico Parodi and colleagues on matrix metalloproteinase inhibitors might point to the time to come of endovascular repair via a biologic solution.³⁰ Early detection with smoking cessation and healthier lifestyles could markedly reduce the overall burden of aortic affliction and represent an innovation in prophylactic direction. Until and so, the venture capital community will exist monitoring the progress of contempo venture-backed companies similar TriVascular2, Nellix, and Aptus Endosystems to see if they tin can overcome historical barriers to success and produce returns for patients and investors alike.

DISCLOSURE

Dr. Resnick is an investor at Prism VentureWorks, a venture capital business firm. Prism VentureWorks is an investor in Aptus Endosystems, Inc.

REFERENCES

Platzer Thousand. Patient Capital. National Venture Capital Association. Accessed December 30, 2008. Available at: http://nvca.org/pdf/NVCAPatientCapital.pdf
Ackerly D C, Valverde A Grand, Diener L W, et al. Fueling innovation in medical devices (and beyond): venture capital letter in health care. Health Aff (Millwood) 2009;28:w68–w75. [PubMed] [Google Scholar]
National Venture Capital Association Accessed Dec 31, 2008. Available at: http://world wide web.nvca.org/pdf/q208VCPerformanceRelease.pdf
Yearbook 2008 National Venture Capital Clan. Accessed December 18, 2008. Bachelor at: http://nvca.org/pdf/NVCAYearbook2008.pdf
Ferrari R. Value Creation for Health Care Startups. In: Health Care Venture Capital letter Best Practices. Boston, MA: Aspatore; 2008.
VenturXpert database. Accessed Dec 29, 2008. Bachelor at: http://vx.thomsonib.com/NASApp/VxComponent/VXMain.jsp
U.South. Venture Partners Investment approach page. Accessed Jan v, 2009. Available at: http://www.usvp.com/html_vers/arroyo.html
Saftlas H. Industry Surveys—Healthcare: Pharmaceuticals. New York, NY: Standard & Poors; 2008.
Stewart K, Hu C, Cal Fifty. Medtech Analyzer: October 2008: Buckle Up, Things May Get Bumpy. Credit Suisse; 2008.
Medtronic 2008 10K SEC filing. Accessed January v, 2009. Available at: http://investorrelations.medtronic.com/secfiling.cfm?filingID=897101-08-1392
Lee T, Yee C. Medtronic, Inc: Premier Franchise in Medical Applied science. San Francisco, CA: Piper Jaffray; 2008.
U.Due south. Market for Peripheral Vascular Devices Vancouver, Canada: iData Research Inc.; 2007.
U.S. Markets for Peripheral Vascular Devices Toronto, Canada: Millenium Research Group; 2007.
Leurs L J, Buth J, Laheij R J. Long-term results of endovascular abdominal aortic aneurysm treatment with the first generation of commercially available stent grafts. Arch Surg. 2007;142:33–41. [PubMed] [Google Scholar]
Marrewijk C J van, Leurs L J, Vallabhaneni S R, et al. Take a chance-adjusted outcome assay of endovascular abdominal aortic aneurysm repair in a big population: how exercise stent-grafts compare? J Endovasc Ther. 2005;12:417–429. [PubMed] [Google Scholar]
EVAR Trial Participants Endovascular aneurysm repair versus open up repair in patients with abdominal aortic aneurysm (EVAR trial 1): randomised controlled trial. Lancet. 2005;365:2179–2186. [PubMed] [Google Scholar]
Prinssen G, Verhoeven East L, Buth J, et al. A randomized trial comparison conventional and endovascular repair of abdominal aortic aneurysms. North Engl J Med. 2004;351:1607–1618. [PubMed] [Google Scholar]
Moise K A, Woo E Y, Velazquez O C, et al. Barriers to endovascular aortic aneurysm repair: by experience and implications for future device development. Vasc Endovascular Surg. 2006;twoscore:197–203. [PubMed] [Google Scholar]
Makaroun G S, Dillavou Due east D, Kee S T, et al. Endovascular handling of thoracic aortic aneurysms: results of the phase Two multicenter trial of the GORE TAG thoracic endoprosthesis. J Vasc Surg. 2005;41:ane–ix. [PubMed] [Google Scholar]
Ricotta J J, Oderich Grand S. Fenestrated and branched stent grafts. Perspect Vasc Surg Endovasc Ther. 2008;20:174–187. discussion 188–189. [PubMed] [Google Scholar]
Donas Chiliad P, Kafetzakis A, Umscheid T, et al. Vascular endostapling: new concept for endovascular fixation of aortic stent-grafts. J Endovasc Ther. 2008;15:499–503. [PubMed] [Google Scholar]
Rosen R J, Dark-green R M. Endoleak management following endovascular aneurysm repair. J Vasc Interv Radiol. 2008;nineteen(suppl):S37–S43. [PubMed] [Google Scholar]
Prinssen M, Verhoeven Due east L, Buth J, et al. A randomized trial comparison conventional and endovascular repair of abdominal aortic aneurysms. N Engl J Med. 2004;351:1607–1618. [PubMed] [Google Scholar]
Burns Fifty R, Housman M G, Robinson C A. Market entry and leave by biotech and device companies funded past venture capital. Health Aff (Millwood) 2009;28:w76–w86. [PubMed] [Google Scholar]
Motley Rice Guidant Ancure Endograft System page. Accessed Dec thirty, 2008. Bachelor at: http://motleyrice.com/medical/devices/GuidantAncureEndograftSystem/default.asp
Wallack T. Boston Scientific cited by FDA for procedures. The Boston Globe; 2007. Accessed December 29, 2008. Bachelor at: http://www.boston.com/business/healthcare/articles/2007/09/08/boston_scientific_cited_by_fda_for_procedures/
Boston Scientific 2006 10K SEC filing. Accessed January 5, 2009. Available at: http://www.secinfo.com/d1znFa.uhw.htm
Katzen B T, MacLean A A. Past, present, and future endograft devices. Tech Vasc Interv Radiol. 2005;8:16–21. [PubMed] [Google Scholar]
Edwards Lifesciences Newsroom page. Accessed December 30, 2008. Available at: http://www.edwards.com/newsroom/nr20040406.htm
Parodi F East, Mao D, Ennis T L, et al. Suppression of experimental abdominal aortic aneurysms in mice by treatment with pyrrolidine dithiocarbamate, an antioxidant inhibitor of nuclear factor-kappaB. J Vasc Surg. 2005;41:479–489. [PubMed] [Google Scholar]

Articles from Seminars in Interventional Radiology are provided hither courtesy of Thieme Medical Publishers

Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3036456/

Posted by: furnesswidefirearm.blogspot.com